Vietnam’s long-awaited upgrade to emerging market status is an “important milestone” for the country, experts say, yet they also warn that the inflow of foreign money will go toward companies that bear little resemblance to the country’s export-manufacturing economy.
On Sept. 21, Vietnamese stocks entered FTSE Russell’s emerging market ranks, capping a years-long effort by the Southeast Asian country to meet the index provider’s criteria.
“Vietnam’s upgrade to emerging market status is an important milestone,” says Anh Tran, a finance professor at the Bayes Business School at City St George’s, University of London. “It serves as external validation of the country’s economic development and financial market reforms, and places Vietnam within the universe of institutional investors that either benchmark against or track FTSE emerging market indices.”
This upgrade puts Vietnam alongside four other Southeast Asian countries—Thailand, Malaysia, Indonesia, and the Philippines—which the index provider has classified as “emerging” markets. Investors often use FTSE’s and MSCI’s benchmarks to guide their investment decisions; the upgrade could channel $6 billion in capital from foreign investors to Vietnamese companies.
“General Secretary To Lam once said that a global financial hub cannot rely solely on domestic liquidity or traditional administrative frameworks,” explains Nguyen Luong Hai Khoi, a researcher and academic at the University of Oregon. “Instead, it requires a modernized capital market as its foundation.” Vietnam hopes to raise $76 billion a year through its capital markets by 2030, reducing its dependence on bank credit.
Vietnam had to reform its market regulations to win FTSE’s approval. The Ho Chi Minh Stock Exchange worked with South Korea’s stock market to launch a new trading system. Vietnam also eased some foreign ownership limits and pushed companies to disclose more information in English.
“The FTSE upgrade is an important opportunity, rather than an endpoint,” says Thu Phuong Pham, an associate professor of finance at Australia’s Curtin University. “Its longer-term benefits will depend on the continued development of market infrastructure and arrangements that support efficient and transparent trading.”
A mismatch
As part of the upgrade, FTSE also added 27 Vietnamese companies, including Masan Group, VietJet Aviation, and Gelex Group, to its global index. Their inclusion makes some of Vietnam’s largest companies more visible to global asset managers.
Yet how much that visibility translates into investment is another question.
“Index money follows the rules of the index, not the shape of the economy,” Hanh Le, a finance lecturer at Vietnam’s RMIT University, explains.
Vietnam reported 8.2% growth in the first half of 2026, its strongest performance in 15 years, primarily due to strength in export-oriented sectors like electronics and metals. Exports rose over 20% in the first seven months of the year, despite a 20% U.S. tariff on Vietnamese goods.
“Vietnam grows on foreign-invested manufacturing and exports, but very little of that is listed,” Le continues. “What passes FTSE’s tests for size, liquidity and free float is overwhelmingly financial: 15 of the 27 companies in the basket are banks or securities firms.”
And of the 27 names, only six—Vietcombank, Vingroup, Vinhomes, BIDV, VP Bank and Hoa Phat—were added to the FTSE All-World Index, one of the most widely-tracked indices.
“Even within those six, ownership caps and thin free float limit how much foreigners can buy: only banks that absorbed weaker lenders can now go to 49%, and state-controlled Vietcombank is excluded,” Le adds.
What Hanoi must do next
For all the fanfare of Vietnam’s upgrade, the VN-Index, the country’s benchmark index, dropped by 0.9% on Sept. 21, and trading turnover on the Ho Chi Minh City Stock Exchange plunged 33% from the previous Friday. The VN-Index is currently down about 2% for the week.
To capture and retain foreign investors, experts say Vietnam still needs to improve market infrastructure, transparency and quality. Nguyen points to corporate reporting in English, clearing frameworks aligned with international standards, and policies steering capital into high-tech manufacturing, all areas where Vietnam still lags behind more mature emerging markets.
The bigger risk may be concentration. “Six companies carry the foreign story, and Vingroup and Vinhomes alone accounted for most of the index’s gains last year,” says Le. “That is a market that is easy to exit.” (In fact, foreign investors have been net sellers of Vietnamese stocks since 2022)
Notably, MSCI—another index provider—still classifies Vietnam as a frontier market, citing the country’s continued limits on foreign ownership.
“The MSCI’s requirements are distinctly more stringent,” concludes Nguyen. “The FTSE is a crucial psychological and operational stepping stone, but an MSCI upgrade would require a separate, heavier set of institutional reforms.”
This story was originally featured on Fortune.com
Recent Comments